Entrepreneurial Marketing for SMEs

Entrepreneurial Marketing for SMEs

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Entrepreneurial Marketing for SMEs Luca Cacciolatti University of Westminster, UK and Soo Hee Lee University of Kent, UK

Luca Cacciolatti and Soo Hee Lee 2015 Softcover reprint of the hardcover 1st edition 2015 978-1-137-53256-5 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2015 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978-1-349-55975-6 DOI 10.1057/9781137532589 ISBN 978-1-137-53258-9 (ebook) This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Cacciolatti, Luca, author. Entrepreneurial marketing for SMEs / Luca Cacciolatti, Soo Hee Lee. pages cm 1. Small business marketing. 2. Small business Management. 3. Marketing Management. I. Title. HF5415.13.C23 2015 658.8 dc23 2015023258

Contents List of Figures List of Tables Preface viii ix x 1 Introduction 1 1.1 What is entrepreneurial marketing? 2 1.2 Reading guidelines 4 2 The Nature of the Small and Medium-Sized Enterprise 6 2.1 What is a SME? A taxonomy of small businesses 6 2.2 Factors affecting marketing in SMEs 11 2.2.1 The effect of size 11 2.2.2 Availability of resources 14 2.2.3 Market orientation and marketing intelligence 17 2.2.4 Marketing orientation and business life cycles 20 3 Small Business Owners and Their Environment 28 3.1 Two typologies of small business owners 29 3.1.1 Entrepreneurs and owner-managers 29 3.1.2 Entrepreneurial culture and personal characteristics 32 3.2 Entrepreneurial orientation 35 3.3 Environment and opportunities 37 3.3.1 The external environment: institutional factors affecting SMEs 38 3.3.2 Competitors, suppliers, intermediaries and consumers 40 4 Entrepreneurial Cognition and Learning 46 4.1 Entrepreneurial cognition and Kolb s experiential learning 46 4.2 Institutions and entrepreneurial behaviour 47 4.3 Entrepreneurs adaptation to the environment 49 5 Growth Strategies within an SME Context 57 5.1 Factors affecting SMEs business growth 58 5.1.1 Owner-manager s culture 58 v

vi Contents 5.1.2 Available resources 60 5.1.3 Business-owner personal characteristics 61 5.1.4 Company size and life stage 62 5.1.5 Competition and other marketing constraints 63 5.2 The diversity of the drivers to growth 64 5.3 Differentiation versus me-too strategies 65 5.4 Marketing decision-making and performance: measures available to SMEs 67 5.4.1 Marketing decision-making influencing factors 67 5.4.2 Measures to inform marketing decision-making and to monitor performance 71 6 The Role of Structured Marketing Information in SMEs Decision-Making 89 6.1 The relationship between business growth and information use 91 6.2 Types, source and frequency of information use 92 6.3 Marketing intelligence: SMEs and owner-managers characteristics 94 7 Internationalisation Strategies 104 7.1 Internationalisation: enablers, motives and models 104 7.1.1 Enablers of internationalisation 104 7.1.2 Motives of internationalisation 105 7.1.3 Models of internationalisation 107 7.2 Internationalisation strategies 110 8 Value Propositions: How to Build SMEs Offering 116 8.1 Understanding the concept of value 118 8.2 Segmenting the market 120 8.3 Socio-geo-demographic segmentation 122 8.4 Demographic and geo-demographic segmentation methodology 123 8.4.1 Classification features 125 8.4.2 Socio-geo-demographic segmentation strengths and weaknesses 129 8.5 Psychographic segmentation 131 8.5.1 Psychographic segmentation strengths and weaknesses 132 8.5.2 Behavioural segmentation 133 8.5.3 Considerations on variables selection and on segmentation use 134

Contents vii 8.6 Targeting and positioning 138 8.6.1 Targeting 138 8.7 Product concept design 142 8.7.1 Levels of product manipulation 143 8.7.2 Types of products 144 9 Pricing and Distribution Decisions in a Context of Low Distribution Capacity 150 9.1 Pricing strategies 151 9.2 Distribution strategies 154 10 Building Brands in SMEs 157 10.1 Brands functionality and the branding activity 157 10.1.1 Differentiating function 158 10.1.2 Communication function 158 10.1.3 Relational function 159 10.1.4 The value element of branding 161 10.2 Mission statements and consumers experience 162 10.3 The importance of branding and branding success factors 162 10.3.1 Why branding is important 162 10.3.2 Success factors in branding 164 11 Supply Chain Relationships Management: SMEs Partners 173 11.1 Different partners... different audiences 174 11.2 Supply chain flows 176 11.3 Creating value through relationships 178 Notes 185 Bibliography 187 Index 213

List of Figures 5.1 SME growth phases, adapted from Chaston 63 5.2 Frequency of purchase affecting marketing decisionmaking and performance within an SME context 68 5.3 Perceptual map 80 9.1 White bread shoppers profiles 152 9.2 Value continuum 153 11.1 Simple structure of a supply chain 174 11.2 Diagram of supply chain flows, adapted from Mentzer 177 viii

List of Tables 2.1 EU criteria to define SMEs 8 5.1 Factors affecting marketing decision-making and performance within an SME context 74 5.2 Sales per customer 75 5.3 Repeat purchase 76 5.4 Example of rating scale 77 5.5 Example of a rating dataset 78 5.6 Comparison of customers preferences to our average score 78 ix

Preface This book is aimed at explaining key topics and challenges of entrepreneurial marketing in a coherent and logically presented sequence. The topics, represented in the constitutive chapters of the book, are linked to each other according to a specific rationale that satisfies the necessary condition for contextualising the practice of marketing amongst SMEs. The book considers the nature of the SME and the relative institutional effects of the environment in which the SME operates. Therefore, the book truly integrates both entrepreneurial and marketing perspectives of the subject within the same book. Furthermore, all chapters, although linked with each other through a light narrative, critically discuss major issues of entrepreneurial marketing with relevant and up-to-date academic knowledge. All chapters present a set of introductory questions reflecting entrepreneurial marketingrelated problems that the reader is called to reflect upon before reading the chapter. The presence of these questions sets up the base for a critical and engaged approach to reading the chapter. This approach is the foundation of a problem-based learning philosophy which encourages the reader to engage more critically with the subject dealt with. The primary audience of this book are undergraduate and postgraduate students who want to approach the subject of entrepreneurial marketing in a coherent and summative, yet comprehensive, way. Most importantly, this is a book that maintains academic rigour while being reader-friendly. This book was designed to encourage lecturers and students to adopt a problem-based learning (PBL) approach by making use of the information of this book (according to their expertise and creativity) in their classes along with case studies, simulations and critical discussions. PBL is about learning from the solution to specific problems, which also means learning to raise questions, identify problems, structure and deconstruct problems, and finally, solve problems. The PBL approach in marketing sprung up as a reaction to the criticism that marketing graduates were trained in non-integrated curricula whose modules did not reflect the need for training oriented towards problem-solving, was quite static rather than dynamic, and lacked integration with the industry s reality. Hopefully, the book will assist readers in improving their holistic thinking and problem-solving skills. x